Vol. 152, No. 4 — February 21, 2018
SOR/2018-12 February 2, 2018
INCOME TAX ACT
P.C. 2018-52 February 2, 2018
Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 221 (see footnote a) of the Income Tax Act (see footnote b), makes the annexed Regulations Amending the Income Tax Regulations (2014, 2015 and 2016 Livestock Deferrals).
Regulations Amending the Income Tax Regulations (2014, 2015 and 2016 Livestock Deferrals)
1 The Income Tax Regulations (see footnote 1) are amended by adding the following after section 7305:
7305.01 (1) For the purposes of subsections 80.3(4) and (4.1) of the Act, the following regions are prescribed drought regions or prescribed regions of flood or excessive moisture:
- (a) in respect of the 2014 calendar year
- (i) in Manitoba, Census Divisions No. 17, Unorganized, and No. 20, Unorganized, South Part, as these divisions were developed by Statistics Canada for the 2011 Census, the Municipality of Shoal Lake, the Reserve of Valley River 63A and the Rural Municipalities of Albert, Alonsa, Archie, Arthur, Birtle, Blanshard, Brenda, Cameron, Clanwilliam, Coldwell, Daly, Dauphin, Edward, Ellice, Elton, Eriksdale, Ethelbert, Gilbert Plains, Glenella, Glenwood, Grahamdale, Grandview, Hamiota, Harrison, Hillsburg, Killarney-Turtle Mountain, Lakeview, Langford, Lansdowne, Lawrence, McCreary, Miniota, Minitonas, Minto, Morton, Mossey River, Mountain, North Cypress, North Norfolk, Oakland, Ochre River, Odanah, Park, Pipestone, Portage la Prairie, Riverside, Rosedale, Rossburn, Russell, Saskatchewan, Shell River, Shellmouth-Boulton, Sifton, Siglunes, Silver Creek, South Cypress, St. Laurent, Ste. Rose, Strathclair, Swan River, Wallace, Westbourne, Whitehead, Whitewater, Winchester, Woodlands and Woodworth,
- (ii) in British Columbia, the Census Subdvisions of Alberni-Clayoquot A, C and D, Bulkley-Nechako A to G, Capital F, Cariboo A to C and I, Comox Valley A, Cowichan Valley F, Fraser-Fort George A and C to H, Nanaimo C and H, Peace River B to E and Powell River D and Part 2 of Census Subdivision Capital H, as these subdivisions were developed by Statistics Canada for the 2011 Census,
- (iii) in Saskatchewan, the Rural Municipalities of Antler, Argyle, Buchanan, Calder, Cana, Churchbridge, Clayton, Cote, Elfros, Emerald, Enniskillen, Fertile Belt, Foam Lake, Garry, Good Lake, Grayson, Hazel Dell, Insinger, Invermay, Ituna Bon Accord, Kelvington, Keys, Lakeview, Langenburg, Livingston, Martin, Maryfield, McLeod, Moose Creek, Moose Mountain, Moosomin, Mount Pleasant, Orkney, Ponass Lake, Preeceville, Reciprocity, Rocanville, Saltcoats, Sasman, Silverwood, Sliding Hills, Spy Hill, St. Philips, Stanley, Storthoaks, Wallace, Walpole, Wawken and Willowdale, and
- (iv) in Alberta, the Counties of Birch Hills, Clear Hills, Grande Prairie, Mackenzie, Northern Lights, Northern Sunrise and Saddle Hills and the Municipal Districts of Big Lakes, Fairview, Greenview, Peace, Smoky River and Spirit River;
- (b) in respect of the 2015 calendar year
- (i) in Manitoba, Census Divisions No. 18, Unorganized, East Part, No. 19, Unorganized, No. 20, Unorganized, North and South Parts, and No. 21, Unorganized, as these divisions were developed by Statistics Canada for the 2011 Census, the Municipalities of Ethelbert, Gilbert Plains, Grandview, Minitonas-Bowsman, Mossey River, Roblin, Ste. Rose and Swan Valley West, the Reserve Valley River 63A, the Rural Municipalities of Alonsa, Dauphin, Grahamdale, Lakeshore, Mountain and Riding Mountain West and the portion of the Rural Municipality of West Interlake that corresponds to the territory of the Rural Municipality of Siglunes, as it existed on December 31, 2014,
- (ii) in British Columbia, the Census Subdvisions of Abbotsford, Alberni-Clayoquot A to D and F, Bulkley-Nechako A to G, Burnaby, Capital F and G, Cariboo A to L, Central Coast A and C, Central Kootenay A to E, G, H, J and K, Central Okanagan, Central Okanagan J, Central Saanich, ColumbiaShuswap A to F, Comox Valley A, B (Lazo North) and C (Puntledge-Black Creek), Cowichan Valley B, F, G and I, East Kootenay A to C and E to G, Fraser Valley A to G, Greater Vancouver A, Kitimat-Stikine B, Kootenay Boundary B to E, Mount Waddington A to D, Nanaimo (City), Nanaimo C and E to H, North Cowichan, North Okanagan B and D to F, North Saanich, Okanagan-Similkameen A to H, Pitt Meadows, Powell River A to D, Saanich, SquamishLillooet A to D, Strathcona A, C and D (Oyster Bay-Buttle Lake), Sunshine Coast A, Thompson-Nicola A (Wells Gray Country), B (Thompson Headwaters), E (Bonaparte Plateau), I (Blue Sky Country), J (Copper Desert Country), L (Grasslands), M (Beautiful Nicola Valley-North), N (Beautiful Nicola Valley-South), O (Lower North Thompson) and P (Rivers and the Peaks), Part 2 of Census Subdivision Capital H, as these subdivisions were developed by Statistics Canada for the 2011 Census,
- (iii) in Saskatchewan, the Rural Municipalities of Antelope Park, Arlington, Auvergne, Baildon, Battle River, Beaver River, Bengough, Big River, Big Stick, Biggar, Blaine Lake, Bone Creek, Bratt’s Lake, Britannia, Brokenshell, Buffalo, Calder, Caledonia, Canaan, Canwood, Carmichael, Caron, Chaplin, Chester, Chesterfield, Clayton, Clinworth, Corman Park, Cote, Coteau, Coulee, Craik, Cupar, Cut Knife, Deer Forks, Douglas, Dufferin, Dundurn, Eagle Creek, Edenwold, Eldon, Elmsthorpe, Enfield, Enterprise, Excel, Excelsior, Eye Hill, Eyebrow, Fertile Valley, Fillmore, Fox Valley, Francis, Frenchman Butte, Frontier, Glen Bain, Glen McPherson, Glenside, Grandview, Grass Lake, Grassy Creek, Gravelbourg, Great Bend, Gull Lake, Happy Valley, Happyland, Harris, Hart Butte, Hazel Dell, Heart’s Hill, Hillsborough, Hillsdale, Hudson Bay, Huron, Indian Head, Kelvington, Key West, Keys, Kindersley, King George, Lac Pelletier, Lacadena, Laird, Lajord, Lake Alma, Lake Johnston, Lake of the Rivers, Laurier, Lawtonia, Leask, Livingston, Lone Tree, Longlaketon, Loon Lake, Loreburn, Lost River, Lumsden, Manitou Lake, Mankota, Maple Bush, Maple Creek, Mariposa, Marquis, Marriott, Mayfield, McKillop, Meadow Lake, Medstead, Meeting Lake, Meota, Mervin, Milden, Milton, Miry Creek, Monet, Montmartre, Montrose, Moose Jaw, Morse, Mountain View, Newcombe, North Battleford, North Qu’Appelle, Norton, Oakdale, Old Post, Parkdale, Paynton, Pense, Perdue, Piapot, Pinto Creek, Pittville, Pleasant Valley, Poplar Valley, Porcupine, Prairiedale, Preeceville, Progress, Redberry, Redburn, Reford, Reno, Riverside, Rodgers, Rosedale, Rosemount, Round Hill, Round Valley, Rudy, Sarnia, Saskatchewan Landing, Scott, Senlac, Shamrock, Sherwood, Snipe Lake, South Qu’Appelle, Spiritwood, St. Andrews, St. Philips, Stonehenge, Surprise Valley, Sutton, Swift Current, Terrell, The Gap, Tramping Lake, Turtle River, Val Marie, Vanscoy, Victory, Waverley, Webb, Wellington, Weyburn, Wheatlands, Whiska Creek, White Valley, Willow Bunch, Wilton, Winslow, Wise Creek and Wood River, and
- (iv) in Alberta, the portion of the territory of Alberta that is not included in, nor surrounded by, the Improvement Districts No. 12 and 24 and the Regional Municipality of Wood Buffalo; and
- (c) in respect of the 2016 calendar year
- (i) in Ontario, the Cities of Barrie, Belleville, Brampton, Burlington, Clarence-Rockland, Cornwall, Hamilton, Kawartha Lakes, Kingston, Markham, Mississauga, Niagara Falls, Oshawa, Ottawa, Peterborough, Pickering, Port Colborne, Quinte West, St. Catharines, Thorold, Toronto, Vaughan and Welland, the Counties of Haldimand, Norfolk and Prince Edward, the Municipalities of Brighton, Centre Hastings, Clarington, Highlands East, Marmora and Lake, North Grenville, Port Hope, South Dundas, The Nation, Trent Hills, Trent Lakes and Tweed, the Towns of Ajax, Aurora, Bracebridge, Bradford West Gwillimbury, Caledon, East Gwillimbury, Fort Erie, Georgina, Gravenhurst, Greater Napanee, Grimsby, Halton Hills, Innisfil, Lincoln, Milton, Mono, New Tecumseth, Newmarket, Niagara-on-the-Lake, Oakville, Pelham, Richmond Hill, Wasaga Beach, Whitby and Whitchurch-Stouffville, the Townships of Addington Highlands, Adjala-Tosorontio, Alfred and Plantagenet, Algonquin Highlands, Alnwick/Haldimand, Amaranth, Asphodel-Norwood, Athens, Augusta, Beckwith, Brock, Cavan Monaghan, Central Frontenac, Champlain, Clearview, Cramahe, Douro-Dummer, Drummond/North Elmsley, East Hawkesbury, Edwardsburgh/ Cardinal, Elizabethtown-Kitley, Essa, Front of Yonge, Frontenac Islands, Havelock-Belmont-Methuen, King, Lake of Bays, Leeds and the Thousand Islands, Limerick, Loyalist, Madoc, Melancthon, Minden Hills, Montague, Mulmur, North Dundas, North Glengarry, North Kawartha, North Stormont, Oro-Medonte, Otonabee-South Monaghan, Puslinch, Ramara, Rideau Lakes, Russell, Scugog, Selwyn, Severn, South Frontenac, South Glengarry, South Stormont, Springwater, Stirling-Rawdon, Stone Mills, Tay, Tay Valley, Tiny, Tudor and Cashel, Tyendinaga, Uxbridge, Wainfleet, West Lincoln and Wollaston, the United Townships of Dysart, Dudley, Harcourt, Guilford, Harburn, Bruton, Havelock, Eyre and Clyde and the Village of Merrickville-Wolford,
- (ii) in Quebec, the Cities of Gatineau, Lachute, Mirabel, Saint-Jérôme and Salaberry-de-Valleyfield, the Municipalities of Boileau, Bowman, Denholm, Duhamel, Elgin, Franklin, Grenville-sur-la-Rouge, Hinchinbrooke, Huberdeau, Kazabazua, La Conception, La Minerve, Labelle, Lac-des-Plages, Lac-Sainte-Marie, Lac-Simon, Les Cèdres, Mayo, Mille-Isles, Montcalm, Montpellier, Morin-Heights, Mulgrave-et-Derry, Namur, Notre-Dame-de-Bonsecours, Notre-Dame-de-la-Paix, Notre-Dame-du-Laus, Oka, Ormstown, Papineauville, Plaisance, Ripon, Saint-Adolphe-d’Howard, Saint-André-Avellin, Saint-André-d’Argenteuil, Saint-Anicet, Saint-Clet, Saint-Faustin-Lac-Carré, Saint-Joseph-du-Lac, Saint-Placide, Saint-Polycarpe, Saint-Sixte, Saint-Stanislas-de-Kostka, Saint-Télesphore, Sainte-Barbe, Sainte-Justine-de-Newton, Sainte-Marthe, Très-Saint-Rédempteur, Val-des-Bois and Wentworth-Nord, the Parishes of Brébeuf and Saint-Louis-de-Gonzague, the Regional County Municipality of Les Collines-de-l’Outaouais, the Towns of Boisbriand, Brownsburg-Chatham, Coteau-du-Lac, Mont-Tremblant, Rigaud, Saint-Colomban, Saint-Eustache, Saint-Sauveur, Sainte-Agathe-des-Monts and Vaudreuil-Dorion, the Townships of Amherst, Arundel, Dundee, Godmanchester, Gore, Harrington, Lochaber, Lochaber-Partie-Ouest, Low and Wentworth and the Census Subdivision of Lac-Ernest (Unorganized), as this subdivision was developed by Statistics Canada for the 2016 Census,
- (iii) in Nova Scotia, the Counties of Annapolis and Kings, the Districts of Argyle, Barrington, Chester, Clare, Digby, Lunenburg, Shelburne, West Hants and Yarmouth and the Region of Queens,
- (iv) in British Columbia, the Census Subdivisions of East Kootenay A, Kitimat-Stikine A, B and D and of Skeena-Queen Charlotte D and E, as these subdivisions were developed by Statistics Canada for the 2016 Census, and
- (v) in Alberta, the City of Calgary, the Counties of Clearwater, Kneehill, Lacombe, Lethbridge, Mackenzie, Mountain View, Newell, Red Deer, Rocky View, Vulcan and Wheatland, the Improvement District No. 9, Kananaskis Improvement District, the Municipality of Crowsnest Pass and the Municipal Districts of Bighorn, Foothills, Pincher Creek, Ranchland, Taber and Willow Creek.
(2) For the purpose of this section, reserve has the same meaning as assigned by the Indian Act.
(3) For the purpose of this section, if a portion of territory is surrounded by the territory of a census division, census subdivision, municipal entity or other geographic designation listed in subsection (1) in respect of a year, that portion of territory is deemed to be listed under that subsection in respect of that year.
2 Section 1 applies to the 2014 and subsequent taxation years.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
In circumstances where drought or excess moisture conditions significantly affect forage yields, farmers may be forced to sell breeding livestock (breeding animals and breeding bees) because of the prohibitive costs of maintaining the livestock. The income earned from the sale would be an inclusion in income and subsequently taxed. If new livestock is purchased in the same year, the cost of the purchase would be deducted from income as an expense. However, the sale and repurchase of livestock do not usually happen in the same year because drought or excess moisture conditions can persist for a longer period of time.
Therefore, the Income Tax Act (the “Act”) permits farmers who dispose of breeding livestock because of drought or excess moisture conditions existing in a prescribed region in a year to exclude a portion of the sale proceeds from their taxable income until the following year, or the year following a consecutive series of years where drought or excess moisture conditions persist, as the case may be. In this way, the proceeds of the sale will be available to fund the acquisition of replacement livestock.
The tax deferral is targeted at breeding livestock because its sale is akin to disposing of long-term productive assets. Prior to 2014, livestock that qualified for the deferral included, for example:
- cattle, goats and sheep that are over 12 months of age and are kept for breeding; and
- horses that are over 12 months of age and are kept for breeding in the commercial production of pregnant mares’ urine.
The Act was amended to extend this tax deferral to bees that are kept for breeding and to all types of horses that are over 12 months of age and that are kept for breeding. The Act defines what breeding animals are, including breeding bees, and provides the formula to calculate the deferral amounts.
Each year, Agriculture and Agri-Food Canada recommends to the Minister of Finance that certain regions qualify as prescribed regions on the basis that they have experienced drought or excess moisture conditions. Qualifying regions for a year are then prescribed under the Income Tax Regulations (the “Regulations”) to access the tax relief and must be updated regularly.
- Act on the advice of Agriculture and Agri-Food Canada as to which regions should be prescribed regions on the basis that they have experienced drought or excess moisture conditions.
- Implement the extension of the tax deferral in respect of bees.
On May 28, 2015, the Government of Canada announced a final list of designated regions for which tax deferrals have been authorized for 2014. The final list of designated regions for 2015 was announced on February 2, 2016. The final list of designated regions for 2016 was announced on August 4, 2017.
The Regulations Amending the Income Tax Regulations (2014, 2015 and 2016 Livestock Deferrals) prescribe the drought and excess moisture regions that are eligible for the tax relief in respect of 2014, 2015 and 2016, as previously announced.
As a consequence of the amendments to the Act in 2014, amendments to the Regulations are needed to add references to subsection 80.3(4.1) of the Act so that the tax deferral also applies as of 2014 in respect of bees in the prescribed drought and excessive moisture regions.
The list of prescribed regions was developed through consultations held by Agriculture and Agri-Food Canada with various parties, including provincial agriculture and municipal affairs departments, municipalities, farm associations and crop insurers.
Following the public announcements made by Agriculture and Agri-Food Canada on the prescribed regions for 2014, 2015 and 2016, no comments or concerns have been raised by the public or stakeholders in response to these announcements. Additional information on these announcements is available through Agriculture and Agri-Food Canada’s website.
These amendments to the Regulations will not change existing administrative requirements, nor are they expected to impose new administrative costs on business. Therefore, the “One-for-One” Rule does not apply.
Small business lens
These amendments to the Regulations are not expected to impose new administrative or compliance costs on business. Therefore, the small business lens does not apply.
Most of the amendments are consequential to announcements by the Minister of Agriculture and Agri-Food, concerning his advice to the Minister of Finance that certain regions of Canada be prescribed as drought or excess moisture regions for 2014, 2015 and 2016. The balance of the amendments to the Regulations is consequential to changes made to the Act in 2014 that extended the tax deferral in respect of bees.
The exact amount of income deferred by farmers living in drought or excess moisture regions is difficult to quantify as the amount deferred is not reported in a separate field in the farmers’ income tax return which can be tracked for costing purposes. However, using Statistics Canada data on farming income, it is possible to estimate that the net benefits provided to farmers through the measure, or inversely the cost for the federal government, are unlikely to reach or exceed $1 million in total annually. These benefits represent the time value of a one-year deferral of the tax liability associated with the unreported taxable income. While these benefits may vary from year to year depending on the severity of the drought or excess moisture conditions and the number of affected regions, they are unlikely to reach or exceed $1 million annually.
This measure has a positive impact on the economy because it provides stability to the livestock farming industry when it is affected by adverse, unpredictable weather conditions.
In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan was conducted to determine whether this amendment would have an environmental impact. The results of the preliminary scan demonstrated that there would be no environmental impact associated with this amendment.
Implementation, enforcement and service standards
Farmers claim the drought and excess moisture regions deferral in reporting their income in their income tax return. As a result, farmers claiming the deferral will be subject to the compliance mechanisms available to the Minister of National Revenue. These mechanisms allow the Minister of National Revenue to assess and reassess tax payable, conduct audits and seize relevant records and documents.
Tax Legislation Division
Department of Finance
90 Elgin Street